Thread by @Brad_Setser

I am not a big fan of most of the Apple tear-down studies, as they tend to equate the location of the HQ of the company providing a part with the location of production.

But this one (by Yuqing Xing) was interesting.

voxeu.org/article/how-ip…

1/x

This was framed around the difficulty China faces using a weaker currency to offset tariffs, as China (really Chinese companies) only provides 25% of the $400b of manufactured content in an iPhone X.

2/x

I would have framed the article as "China now supplies more of the manufactured value added of an iPhone that the U.S. -- $104 v $77"

(and i think this is based on the HQ of the firm supplying the part, not the actual production)

3/x

for example, M-Flex was likely making its circuit boards in China before it was acquired by a Chinese firm ...

"Dongshan Precision supplies the printed circuit boards for the iPhone X through its acquired American company M-Flex"

4/x

No matter -- the basic trend of rising Chinese value added in a range of products is very clear. See the OECD for example ...

5/x

oecd.org/industry/ind/T…

The OECD's numbers are in my view more reliable than the tear-down studies, and show the same basic trend. Rising Chinese domestic content in Chinese exports.

6/x

The imported content of China's exports is actually below the OECD/ G-20 norm (something that isn't usually apparent from the prominence of the Apple iPhone tear-down studies)

7/x

The basic trend for China -- which is clear in the aggregate trade data -- is that the Chinese content of China's exports has been rising even as exports have fallen as a share of China's GDP. That's how China now generates a $1 trillion plus surplus in manufacturing.

8/x

But what I would really like to see is a tax tear down of an iPhone sold outside the U.S. --

i.e. a chart showing more Apple Ireland ends up with more of the final sales price than either Apple US, Chinese manufacturing firms or Korean/ Taiwanese chip manufacturers

9/9